In September 2013, shareholders of Dell approved the offer by its founder and CEO Michael Dell, backed by Silver Lake Partners to take the company private for $25 billion, ending six months of bitter opposition from billionaire activist investor Carl Icahn and other investors. Even so, the fair value of Dell’s stock was closer to $17.62 per share, rather than the $13.75 that Michael Dell and Silver Lake paid, Delaware Vice Chancellor Travis Laster said. The holders demanded their shares be appraised for fair-market value.
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This type of lawsuit enables investors who were against a deal to sue and seek a DE judge to determine a fair deal price. Initially appraisal was sought for about 40 million shares, but the bulk was removed for procedural reasons.
To qualify for any compensation that a favorable appraisal can bring, shareholders must have voted against the deal in question.
Dell did not immediately respond to a request for comment. Stuart Grant, a lawyer for the shareholders who challenged the valuation, also declined to comment. They may have to pay tens of millions to investors who opposed the deal. Inc., were ineligible to have their Dell shares appraised because the way in which they held their Dell shares didn’t meet the legal requirements.
The judge said the Dell buyout took advantage of a dip in the company’s stock price, and the firm’s board never determined the intrinsic value before negotiating.
At the time, the Dell deal was the largest buyout since the global financial meltdown.
Other shareholders who sued claimed that Dell was on the cusp of a major turnaround and was worth more than twice what Michael Dell and Silver Lake had paid.
Laster ruled previous year that five large institutional investors including T. Rowe Price Group Inc. and Northwestern Mutual Life Insurance were ineligible to have their Dell shares re-appraised because the way in which they held their Dell shares didn’t meet the legal requirements.
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The case is In RE: Appraisal of Dell Inc., No. 9322, Delaware Chancery Court (Wilmington).
